Far from improving, jobless rate rises

WASHINGTON — Unemployment took a gut-wrenching turn for the worse last month, dashing widespread expectations of improvement, fueling fears that the recovery may be stalling and challenging political leaders who have largely rejected the idea of new stimulus for the troubled economy.

U.S. employers added almost no new jobs in June — only 18,000, the government reported Friday. That pushed the nation's jobless rate higher for the third straight month — to 9.2 percent — and left the number of idled workers at about 14 million, almost half of them jobless for six months or more.

The near-paralysis in hiring extended across virtually the whole economy, including both public and private sectors. Manufacturing, which many analysts had counted on to help improve the picture, was essentially flat. State, local and federal governments shed thousands of jobs, largely in response to lost tax revenues and budget pressures.

"It's an abysmally weak report. All of the distress indicators are flashing red," said Patrick O'Keefe, economic research director at the accounting and advisory firm J.H. Cohn and former deputy assistant secretary at the U.S. Labor Department.

Major stock indexes fell sharply on the news, though they recovered much of the lost ground at day's end. And economists began ratcheting down projections for the second half of the year, when many had been expecting a relatively healthy uptick in growth.

The lack of hiring in June was all the more dismaying because it flew in the face of most economists' predictions. In recent days, many had raised their job-growth forecasts into the 100,000 range; though job creation in May had also been disappointing, that was widely attributed to temporary factors, including a spike in oil prices and manufacturing disruptions stemming from the earthquake and tsunami in Japan.

May was not a blip, however. In fact, the 54,000 new jobs originally reported for that month were revised down to just 25,000 on Friday. And that was followed by a barely perceptible 18,000 new net jobs in June.

By contrast, between February to April, employers added an average of 215,000 jobs per month. That was a solid, if less than spectacular, improvement from previous months, and had raised hopes that the long-awaited rebound in the job market was taking hold.

The setback on employment comes at a time when President Barack Obama and congressional Republicans are locked in a struggle over the federal deficit and intent on cutting federal spending, which in the short term at least would likely bleed steam out of the economy and further darken hiring prospects.

Obama spoke from the White House shortly after the release of the figures. He said the numbers were yet another sign that a full economic recovery is still elusive.

"Our economy as a whole just isn't producing nearly enough jobs for everybody who is looking," he said.

The president called on Congress to end uncertainty over their debt standoff and pass a list of administration-backed proposals, including a payroll tax cut extension and three free trade agreements. Obama's top economist said implementing those policies would reduce the jobless rate a full point by the time Obama faces re-election in the fall of 2012.

But Republican opposition and Washington's heated partisan atmosphere would likely make passing the full slate of administration proposals a political pipe dream.

The pressure on policymakers was intensified by the fact that high levels of unemployment not only inflict pain on the jobless but also impose heavier burdens on working Americans.

At a time when high oil, food and health care costs are diminishing people's spending power, the average hourly earnings for all private-sector employees dropped by 1 cent last month to $22.99. In the past 12 months, average hourly earnings have increased by 1.9 percent, less than the overall rate of inflation.

"It's just an across-the-board retreat," said Heidi Shierholz, an economist at the Economic Policy Institute. "This is really scary."